September 7, 2015

It's difficult to overstate how important California is to
the US clean energy effort. For decades it has been serving as a kind of
existence proof, growing its economy even as per-capita energy use and carbon
intensity have fallen.

Every year, the market researchers at CleanEdge put out a Cleantech
Leadership Index, ranking US cities and states on a range of more than 70
indicators, from renewable energy deployment to VC investment to clean energy
patents to green buildings and more.

California is leading the nation on climate change and clean
energy. But the next phase of its leadership is now on the line.

At issue is a set of bills that would substantially expand
the state's existing clean energy programs. The bills will come up for a vote
in the California Assembly within the next week or two. The oil lobby has
mounted a full-court press against the effort, and a handful of Democrats in
the Assembly are wavering. The stakes could not be higher.

Oil companies have always hated California's climate
leadership

California's clean energy effort encompasses a wide variety
of local and state initiatives, affecting almost every sector of the economy,
but it has always been oil companies that hate it the most.

To understand why, think of oil companies like coal
companies: They provide a commodity. If laws force utilities to clean up, they
can switch to cleaner sources of electricity, but coal companies only sell
coal, so they're screwed. Similarly, laws that reduce petroleum use in motor
vehicles are irritating for car companies, but not fatal — they can make
cleaner cars. The oil companies, however, only sell oil. Less petroleum use in
cars means they sell less of their product to one of the world's biggest
markets.

Two episodes have drawn their particular ire.

The first is California's Clean
Car Standards, which regulate greenhouse gas emissions from motor vehicles.
They were proposed in 2002; the state requested a waiver from the EPA in 2005;
after years of delay, the waiver was granted in 2008; and in 2009, Obama took
the standards as the template for new national fuel economy standards. The oil
companies hated all of that and did everything they could to stop it, to no
effect.

The second episode was the passage of the Global Warming
Solutions Act of 2006, or Assembly Bill 32 (AB 32), under the leadership of
then-Gov. Arnold Schwarzenegger.

Among many other things, AB 32 established a statewide
carbon cap-and-trade system, with the goal of returning to 1990 levels of CO2
emissions by 2020 — around a 15 percent reduction from a business-as-usual
trajectory. As of January, motor vehicles are included under that cap.

AB 32 also established a low-carbon fuel standard (LCFS),
which would limit the carbon content of fuels imported into the state. The LCFS
is in
effect as of January 2011 and has survived several lawsuits.

The oil companies really, really hated AB 32. In
2010, they got a proposition on the state ballot, Prop 23, that would have
gutted the law. The fight that ensued was protracted,
vicious, and expensive, but ultimately the law survived.

But the coalition of oil companies hostile to California's
climate laws has not dissolved — if anything, it has become more
coordinated — and it is now pouring resources into its latest fight,
trying to kill a set of bills that would expand upon AB 32.

California's latest bid to increase the ambition of its
climate program

In a speech this year kicking off his fourth and final term
as governor, Jerry Brown called
for three ambitious state goals, to be reached by 2030:

50 percent reduction in petroleum use

50 percent of the state's electricity to come from
renewables

50 percent increase in the efficiency of the state's
buildings

The following month, California Democrats, led by Senate
President pro tempore Kevin
de León, introduced Senate
Bill 350, which would enshrine those three goals into law.

None would require new government agencies or authorities.
The reduction in petroleum use would be administered by the California Air
Resources Board (CARB), using "existing laws and financial
resources."

The increase in renewables would come by boosting the state's
renewable energy standard, as overseen by the California Public Utilities
Commission (or, for municipal utilities, the California Energy Commission).
And, similarly, the building efficiency goal would be achieved by cranking up
"existing energy efficiency retrofit funding and regulatory tools" in
the hands of the state's energy agencies.

Alongside SB 350 were three other important bills:

SB 32 would build on AB 32 by putting in place a
statewide target of 80 percent reduction from 1990 CO2 levels by 2050.

SB 189 would create an expert committee to "advise
and inform state clean energy and climate actions" to make sure they
create jobs and benefit the economy.

SB 185 would divest the state's two largest pension
funds (CalPERS and CalSTRS) from coal.

All these bills have already passed
the state Senate. They will be voted on in the Assembly in the next week or
two, most likely right after Labor Day. When I spoke with de León last week, he
said, "It's going to be a very, very tough battle. It's going to go down
to the very last vote." All indications are that it's going
to be close.

Big Oil is blitzing against California's latest efforts

The headline bills in this legislative package, 350 and 32,
have drawn support from alarge
and varied cast.

The governor and the state Senate support the bills, as do
both the state's US
senators, as do House Democratic Leader Nancy Pelosi and most
of the California House delegation, as do nine
previous leaders of the state legislature, as do a wide array of state
businesses.

When he spoke
in Nevada last week, President Obama singled out for praise
"leaders in California ... aiming to generate fifty percent of their
electricity from renewables by 2030 — fifty percent — while cutting carbon
pollution from oil by 50 percent."

Perhaps most importantly, according to a recent poll by
the Public Policy Institute of California, the public supports the bills by a
fairly wide margin. Some 69 percent of adults in the state support both AB 32
and the new bill to strengthen it, SB 32. And SB 350 also polls well:

When asked about the targets in [SB 350], strong majorities
favor each one. The electricity goal has the highest support (82%), with
majorities across party lines in favor. Most adults (73%) favor reducing
petroleum use in vehicles, but there are partisan differences: 83 percent of
Democrats and 75 percent of independents are in favor, while a majority of
Republicans (53%) are opposed. Asked about increasing energy efficiency in
buildings, 70 percent of adults are in favor. Democrats (82%) and independents
(75%) are more likely to be in favor than are Republicans (52%).

Lined
up against the bill are Republicans (who are much more likely to
represent car-dependent rural and suburban constituents) and oil companies, as
represented by the Western States Petroleum Association (WSPA).

WSPA has a familiar modus
operandi: Rather than allow oil companies to be the public face of resistance
to clean energy policy, it creates campaign-specific front groups with benign
names like "Californians for Affordable and Reliable Electricity" and
the "California Drivers Alliance." This is not a conspiracy theory,
it's something the association boasts about — this is from a leaked
presentation WSPA did to the Washington Research Council (via Bloomberg
Businessweek):

These attacks are very much like the ones that oil companies
used on behalf of Prop 23, which were rejected by voters and subsequently
disproved by events. (California gas prices have not spiked, except after the refinery
explosion in Torrance.)

The California Senate leadership has a sharp website devoted
to "myths and facts" about SB 350. Among other things, it makes the
point that "the best way to shield consumers from volatile gas prices
is to reduce our dependence on gasoline."

The cost of electric driving is tied to the cost of
technology, and as the market grows and scales, technology will only get
cheaper. (It's already happening.) The same cannot be said of commodities
like oil and coal. Their prices will always fluctuate based on factors outside
the American consumer's control. The best way to reduce exposure to the
volatility of fossil fuel prices is to run electric cars on domestic renewable
energy.

On the subject of whether it is actually possible for
California to cut petroleum use 50 percent by 2030, it's worth checking out this fact sheet from
the state EPA and this longer
analysis from NRDC's Simon Mui. In short, it can be done with an
acceleration of current policies, but it is undoubtedly ambitious.

Democrats in the Assembly are wavering

The fight to protect AB 32 against Prop 23 was a historic
victory for clean-energy advocates in California. But in politics, it's always
easier to preserve the status quo than it is to pass something new. So this
fight is different.

The oil industry's ad and lobbying barrage has a group of
around 20 Democrats in the Assembly getting weak
in the knees, says the Sacramento Bee, which in turn has "bewildered
activists who once expected a smooth ride in the Democratic-controlled
Legislature."

(For those of you keeping score: Opposition is being led by
council member Henry
Perea, who is putting up a series of amendments likely to kill support for
the bill. For some reason, the media insists on referring to the group of
oil-intimidated Dems led by Perea as "moderate Democrats.")

These Dems can't be seen to side with the oil companies, so
they have focused their objections on the authority the bill grants to the
California Air Resources Board (CARB). According to the California Drivers
Alliance, SB 350 would authorize CARB to ration gasoline and levy surcharges on
drivers based on the amount they drive.

In fact, SB 350 authorizes no such measures. According to an analysis of
the bill by the Assembly Natural Resources Committee, "the bill does not
change ARB's regulatory authority" at all. It extends the agency's
existing authority. From the SacBee:

The ARB, which would maintain its existing – and often
controversial – authority over vehicle emissions and fuel standards, estimates
existing policies will reduce petroleum use in cars and trucks by more than 20
percent by 2030. Administration officials say expanding that effort to comply
with SB 350 could include building high-speed rail, increasing fuel efficiency
of cars and providing more incentives for alternative fuels.

But many lawmakers are leery of ceding authority to the
administration to make those decisions.

Originally de León opposed having the legislature intervene
in CARB's decisions, saying it would "politicize" the
regulatory process. But more recently, he and his colleagues have considered
amendments that would address some of those fears, including one prohibiting
CARB from fuel rationing and one that would add legislative appointees to CARB.
"Giving the legislative branch more voice in the process," he told
me, "is definitely something I can live with."

The reaction was unsurprising:

Catherine Reheis-Boyd, president of the Western States
Petroleum Association, said proposed amendments under discussion at the Capitol
do not go far enough.

Somewhat more surprising was this bit of honesty:

"We remain opposed to proposals to reduce petroleum
transportation in California," she said in one prepared statement this
week.

WSPA may cite consumer costs or regulatory authorities, but
in the end it's a petroleum trade group, so it doesn't agree that California
should reduce petroleum use. No bill that reduces petroleum use will please it,
and no amendments are likely to "go far enough," no matter how many
studies are done or legislative buffers installed.

De León told me, "I have every confidence that once Big
Oil's smoke screen clears, the members of the Assembly will see that lives are
at stake and choose the long-term physical and economic health of their
constituents over the short-term profits of polluters."

The stakes in California's latest clean energy fight are
huge

There's an immense amount at stake in this battle. To begin
with, the passage (or not) of SB 350 and its companion bills carries enormous
implications for Jerry Brown's legacy. It's also a test of de León's
political acumen and a moment of truth for the California Democratic Party,
which has had almost total control of the state legislature since 2012. If a
clutch of Democrats panicked by oil-industry lobbying rejects a bill supported
by voters, their own party leaders, and the president, it sends a terrible
signal to voters about the party's ability to follow through on its promises.

Beyond that, if California loses its nerve on climate
policy, the effects could ripple. Currently it is one of the few economies of
any size (if it were a country it would be the world's seventh-largest economy)
that seems to be taking its commitment to the 2 degrees climate
target seriously. Reaffirming that commitment could influence
international climate negotiations, which face a crucial turning point in Paris
this winter and are looking more and more to subnational actors like states and
cities to pick up the slack.

It could also set an example (yet again) for other states,
many of which will soon be casting about for ways to comply with Obama's Clean
Power Plan. If there is any route to a nationwide carbon pricing system,
it's likely to travel the same path as fuel economy standards, which began in
California and spread
from there.

For good or ill, the decisions made in the California
Assembly in coming weeks will reverberate well beyond the state's borders.